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Nifty : 23824

Technical Outlook

Day that was .. Indian equity benchmarks settled the weekly expiry session sharply lower tracking negative global cues. The Nifty concluded at 23,824.10, down 1.16%. Market breadth was in favor of decline with an A/D ratio of 1:2. Broader markets moved in tandem with the benchmark. Sectorally, barring Pharma, all indices closed in the red, with Metals, IT, and BFSI leading the losses

Technical Outlook :

• Nifty started the day on a flat note after initial upmove it once again faced hurdle at 100-day EMA and thereafter witnessed profit booking for the rest of the session. As a result, the daily price action resulted into bearish candle with upper wick, indicating selling pressure at higher levels.

• The key highlight is that following the sharp 1,100-point rally witnessed over the past five sessions, the stochastic oscillator had entered the overbought territory, indicating stretched near-term momentum. During the recent decline, the oscillator retraced to a reading of 38, down from 98 in the previous week, while the index has retraced only 38.2% level of the preceding upmove. We believe this measured pullback is a sign of healthy consolidation, which should strengthen the market structure and establish a strong base for the index's next leg of the upmove towards the 24,500 mark.

• Hence, any decline should be used to accumulate quality stocks, as strong support holds at 23400. Our Constructive bias is based on following observation :

• The ratio chart of Bank Nifty vs Nifty is at the cusp of breaking out from a 5-years consolidation. This technical setup signals that the banking index is poised to accelerate its relatively outperformance and head towards 59300 in the coming month.

• Brent Crude oil prices declined 8% and finally trading below its long-term 200-day EMA (placed at $82). Sustenance below this level would eventually help to reduce India's import bill, acting as powerful tailwind for Indian equities

• The Midcap index is just 1% away from its All Time High, while catch up activity exhibited in the Nifty small cap which has logged a resolute breakout from 18 months falling trendline

Intraday Rational :

• Trend – Index is taking breather after 1100 points rally seen over in recent past

• Levels – Sell around 80% retracement of yesterday range

Nifty Bank : 57184

Technical Outlook

Day that was : Bank Nifty Index witnessed profit booking and closed the day on negative note down 1.3% at 57184 on back of negative global cues.

Technical Outlook :

• Index opened on negative note and drifted southward as it faced resistance around Mondays high of 58000, indicating profit booking at higher levels. The daily price action resulted into bear candle with lower high lower low, indicating profit booking.

• Key point to highlight is that after 10 sessions Index has closed below its previous session low indicating pause in upward momentum. We believe, index is undergoing healthy retracement after rally ~10% in last three weeks which would help stochastic oscillator to cool off overbought territory. Going ahead, we believe couple of days breather cannot be ruled out which would make markets healthier and form higher base above key moving averages placed around 56200 being 200-day EMA coinciding with 61.8% retracement of recent up move(55726-58021) and the stage for next leg of rally.

• Key observation to highlight is that after five-year consolidation the Ratio chart of Banknifty vs Nifty is on the verge of breakout indicating relative outperformance of BankNifty in comparison to Nifty

• A decisive close above 58000 would confirm resumption of uptrend else, consolidation in 58000-56200 range

• PSU Bank Index has formed bearish engulfing candle indicating profit booking around 8800 levels. Going forward we expect Index to consolidate in range 8450-8800 in coming sessions

Intraday Rational :

• Trend - Supportive efforts from 50% retracement of two days range around 57700 levels indicating elevated buying demand.

• Levels – Sell around 80% retracement of yesterday range

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